Extreme Poverty, Economic Growth, and Income Inequality Trilogy in Sub-Saharan Africa and South Asia: A GMM Panel VAR Approach

Mohamed Ali Labidi (), Anis Ochi () and Yosra Saidi ()
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Mohamed Ali Labidi: Carthage High Commercial Studies Institute, University of Carthage
Anis Ochi: University of Jendouba
Yosra Saidi: University of Jendouba

Journal of the Knowledge Economy, 2024, vol. 15, issue 3, No 25, 10592-10612

Abstract: Abstract This study allows the assessment the triangular relationship between extreme poverty, economic growth, and income inequality in South Asia and sub-Saharan Africa. Unlike previous studies in the poverty-inequality-growth literature, this study employed the panel vector autoregressive model to examine the impact of income inequality and economic growth on extreme poverty. Moreover, we used the impulse response function tool, which was developed in the same context, to better understand the reaction of the two main variables of interest, extreme poverty and economic growth, aftershocks on income inequality variable. Finally, the analysis was completed by the variance decomposition of all variables. These analyses were conducted for 56 South Asian and sub-Saharan African countries from 1990 to 2020. Overall, the results show that income inequality has a positive and significant impact and can strongly explain economic growth. Meanwhile, the results indicate a negative and significant relationship between economic growth and extreme poverty. Our empirical result reveals that there is no relationship between income inequality and extreme poverty.

Keywords: Extreme poverty; Economic growth; Income inequality; Panel VAR; Sub-Saharan Africa; South Asia (search for similar items in EconPapers)
JEL-codes: C33 D3 F43 I32 O53 O55 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13132-023-01512-5

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